Random House Bullying Agents On E-Books – But Is It Legal?

Most summers, the biggest late-week concern among publishing honchos is Long Island Expressway traffic to the Hamptons. This week has proven different. Debate is raging about how vulnerable major publishing houses suddenly are after book agent Andrew Wylie formed an electronic publishing imprint for his authors and made an exclusive deal with Amazon. This means that instead of leaving it to a publisher and taking a low split, Wylie gave Amazon sole e-book rights to titles like Ralph Ellison’s Invisible Man, Vladimir Nabakov’s Lolita, Philip Roth’s Portnoy’s Complaint, Hunter S. Thompson’s Fear and Loathing in Las Vegas, John Updike’s Rabbit Run series, Norman Mailer’s The Naked and the Dead and Evelyn Waugh’s Brideshead Revisited. You can read all of them only on the Kindle for $9.99 each, under Wylie’s own Odyssey Editions imprint.

Random House responded with sheer thuggery, blacklisting Wylie in a clear attempt to scare other authors and their reps from trying the same thing. Other publishers also expressed outrage in different ways, like Macmillan CEO John Sargent, who railed about how Wylie’s exclusive deals excluded other e-devices like the Sony Reader (like Macmillan really cares about anything other than its own fortunes). What neither of these houses addressed is the $64,000 question: do they control e-book rights in contracts signed before anyone imagined that e-books might surpass print titles? Many feel the answer is no.

Random House, unable so far to prove different, is using intimidation as a fallback ploy. It’s scary, given the sheer volume of books it publishes, but probably not effective in the long term. The publisher tried in 2001 to nip this whole thing in the bud, suing for summary judgment to stop an e-book venture called Rosetta Books. Random House lost. More recently, Bertelsmann Publishing chairman Markus Dohle sent a warning shot to agents, telling them the publisher was determined to protect its e-book rights, but once again, not mentioning whether it actually controlled them.

“They’ve not said we have the e-rights to the books you’ve written,” said one well connected dealmaker. “They say, we have publishing rights to these books, it costs us a fortune to run this place, and e-books are a huge source of revenue. If we can’t have it all, we’re not working with you.”

I’m told there are two categories of contracts that are causing top publishers to lose sleep at night. There are deals made before e-books existed, where a standard clause read that “all rights not granted to the publisher” belong to the author. Many feel Random House would be hard pressed to win that issue in court. Later contracts are also suspect, despite ambiguous lingo that mentioned things like “microfiche,” but not specifically e-books.

It hardly surprises the publishing community that Wylie would be the one to take the bold step of bettering his clients’ e-royalties by cutting out the middle man and dealing directly with Amazon. Besides the fact his ruthless-sounding nickname is “The Jackal” (earned when he poached author Martin Amis from his longtime rep), Wylie agents many author estates. There are no new books coming, and plenty of ambiguity in ancient contracts that never foresaw the digital age.

The fact that Wylie’s bold move came the same week that Amazon’s Jeff Bezos crowed he sells more e-books for the Kindle than hard cover titles, underscores the stakes here. Authors and their reps resent the way most publishers teamed to standardize e-book pricing, giving authors 25% of net even though e-books cost are a fraction of paper books. All of them are poring over contracts and considering their leverage, even though the extent of that leverage might not be fully understandable until and if a court battle ensues. “Much of the key to this is examining all these contracts to see if the e-book rights are available, ambiguous, or granted,” said Mike Rudell, an attorney for many top authors.

Wylie’s deal isn’t the only time an agent or author has done something like this. Pat Conroy’s agent Marly Rusoff brokered a deal for four of his back list titles to be sold to e-books by Jane Friedman’s Open Road, with the author splitting the proceeds 50-50 with Friedman. Gottlieb, like several agents I spoke to, were wary of starting their own e-imprints, and not because they fear the wrath of a bullying publishing house. “It brings up conflict of interest issues, because it’s one thing so advise a client and have a fiduciary relationship, and another when you become their partner and agent at the same time,” Gottlieb said. “The other issue is, when an author does a book with an online publisher, they forego all legal protections. If you are an estate, and somebody comes along and plagiarizes that book or sues for another reason, you’re on your own to defend that. There is no benefit of legal counsel and insurance that exist at publishing houses.”

“This really is a life and death struggle between classical publishers and the media world of publishers and the reason I say that is, up until 2000, publishers just didn’t have electronic rights,” said Trident Media Group chairman Robert Gottlieb. “Between 30-40% of their income comes from back list sales, and between now and 20125, 50-60% of book sales will migrate to e-books. These publishers will not be able to afford to stay in business if they lose those back lists. Random House recognizes this, they’ve got their own big e-book operation going and have made a very complete and smart analysis of what’s happening. Marcus Dohl is a cool headed guy and he would never take a position like this unless he felt strongly the danger to his business and company justified the decision.”

Some feel that there will be an immediate benefit for the back lists of authors, as publishing houses sweeten the pot and make new deals that protect their interests down the line.